Stationarity and Persistence of the Term Premia in the Polish Money Market
NBP Working Paper No. 227
34 Pages Posted: 11 Mar 2016
Date Written: December 15, 2015
Abstract
The present paper examines the term premia in the interbank money market in Poland. We use analyst surveys to proxy interest rate expectations and forward rate agreement (FRA) market data to construct term premia. We consider the term premia at shorter and longer horizons. Both premia follow autoregressive, stationary processes of low orders. The longer term premium is higher and more volatile than the shorter one; moreover, it is also characterized by substantially higher persistence. Our findings provide direct evidence against the efficient markets hypothesis (EMH) at the short end of the Polish yield curve and indicate areas of potential ineffectiveness of the monetary policy transmission mechanism.
Keywords: short-term interest rate, expectations, term premium, persistence, surveys
JEL Classification: C83, E43, E58, G23
Suggested Citation: Suggested Citation